Stitch Fix CEO Katrina Lake: ‘The current shift in customer behavior is permanent’
When Stitch Fix CEO Katrina Lake took her company public in 2017, her pitch was a little bit rusty.
“We hadn’t raised money in a long time, and we’ve kept quiet about the business,” said Lake. “I was actually out of practice, when it came to introducing the business to investors to help people understand it. It was a double-edged sword: People were shocked and impressed with how big the business was, and that we had been profitable for so long, but it was a lot for people to wrap their heads around exactly how the business worked.”
Stitch Fix’s IPO, which valued it at nearly $2 billion, was the biggest exit for an e-commerce company last year. Now, the company has to prove it can continue to recruit new customers — on top of the more than 2 million who use Stitch Fix already, according to its S-1 — if it wants to keep growing. For the first few years of business, Stitch Fix did little paid marketing, relying on word of mouth and organic growth to bring in new users. That’s changing, as the company figures out the best ways to reach potential customers, and it’s top of mind for Lake as she navigates her first year at the head of a public company.
Lake joined the Glossy Podcast to discuss Stitch Fix’s category expansions and marketing push, plus the changing customer behavior it’s both leading the way for and adjusting to. Edited highlights, below.
On post-IPO priorities
Lake said that a few years ago, when the business was growing at around 100 percent year-over-year, it would have been an exciting time to share that growth rate publicly. But she knew it wasn’t sustainable. By the time the company actually went public, it was growing at a rate of 25 percent year-over-year.
“We had to reach a point of stability first. As a result, our strategy didn’t have to change,” said Lake. “The engines we’re focused on are improving and innovating on the client experience: how to be deeply personalized, how to use data science to get clients more of what they want. The second engine is new launches; we launched plus sizes, men’s and premium, and we’re excited to see those grow.”
On applying the data science behind women’s clothing to menswear
When Stitch Fix launched a menswear category, the business goal was clear: to open up services to the other half of the population to fuel more growth. But deciding where to get started, and finding out whether or not men would take to the customer behavior that’s critical to Stitch Fix’s model — answering personal questions, providing plenty of feedback — was all up in the air. Luckily, according to Lake, Stitch Fix’s men’s business got to a stable path of growth six months in, when she had anticipated it would take a year.
“What works with women seems to work with men. The first day we started considering a men’s business, everything was on the table, including whether it should also be called Stitch Fix at all,” said Lake. “But as we tested and got to understand men, from a psychology perspective, they were a lot more similar than we were expecting. To be able to feel like what we figured out with women translates to men gives us a lot of confidence, as we figure out the future.”
On Stitch Fix’s positioning in a new retail market
Lake said that part of Stitch Fix’s key to success is that it improves its own service by offering brands the data they need to improve their inventory. If customers consistently report that a brand’s size XL isn’t working, the brand can adjust their fit specs accordingly. Working with brands to take Stitch Fix’s wealth of data, and make decisions based off of it, can change whether or not a customer intends to buy from a certain brand, no matter the retail channel.
“The current shift in customer behavior is permanent,” said Lake. “There are a lot of companies out there doing innovative, authentic things with loyal clients. For us, we’re proud that we can be part of a positive brand ecosystem. When brands win, we win, and the clients win.”
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